EU: Economy

Lord Reid of Cardowan Excerpts

Wednesday 2nd November 2011 Lords Chamber

[Lord Sassoon]

My Lords, without wishing to encourage a huge rush of additional speakers, we already have a decent number of very interested and expert noble Lords down for a debate on Europe tomorrow. Indeed, this House is taking the matter very seriously.

[Lord Reid of Cardowan]

My Lords, is it not obvious to all but the most blinkered zealot that, whether the Greeks default or not, in the medium to long term the only prospect of survival for the eurozone—even that is not guaranteed—is with such a centralisation of political and fiscal ancillary powers that we would effectively have created qualitatively two different European structures? Will the Government enlighten us on what contingency planning they are making for the day that will inevitably come when that decision or those decisions have to be made?

[Lord Sassoon]

My Lords, I do not accept the very simplistic idea that we are headed for a two-speed Europe. There is already a variable geometry in Europe in other areas apart from the euro, such as justice and home affairs, where there are different arrangements for certain member states. The critical lesson out of all this is that the UK must stick to its own fiscal deficit reduction policies because it is those which are giving us the benefit of 10-year interest rates today at 2.2 per cent, whereas countries such as Italy, which had interest rates very similar to ours before the financial crisis, have interest rates not at 2.2 per cent but at 6.2 per cent. So we must stick to keeping our own house in order.